Final Thoughts
Final Thoughts
Written by John Packard
March 20, 2022
The war in Ukraine continues to impact the volatility in steel markets around the world. Here in the United States, we have seen steel buyers coming off the sidelines as they look to protect themselves against the possibility of being short steel. This despite flat-rolled steel inventories being at 2.72 months’ supply at the end of February, according to our proprietary index.
With the new surge of buying, lead times have come off their cycle lows and have rebounded. Benchmark hot rolled lead times are now averaging slightly more than 5 weeks, cold rolled has moved to almost 7 weeks, galvanized is at 7 weeks, and Galvalume lead times are at 8.5 weeks. The lead times quoted come from our most recent survey of manufacturing companies and service centers.
Over the past two weeks, we have seen steel mills reverse the willingness to negotiate steel prices. In early March, 92% of our survey respondents reported steel mills willing to negotiate hot rolled spot pricing. Last week that number dropped to 23%. We saw similar movement in cold rolled and coated products, with CRC going from 89% to 25%, galvanized went from 92% to 35%, and Galvalume went from 80% to 10%.
What is the result of the jump in lead times, higher scrap prices, the loss of pig iron supply out of both Russia and Ukraine, and price increase announcements by domestic steel mills? Those factors have changed the psychology of domestic steel buyers. They are no longer sitting on their hands and are instead engaged again with the spot markets. And that has caused steel prices to jump.
According to Steel Market Update data, hot rolled prices increased the most we have ever seen in one week this past week. Benchmark HRC went from $1,050 per ton ($52.50/cwt), with some numbers in the $800s per ton, to $1,260 per ton, with some buyers reporting mills trying to go as high as $1,400 per ton.
Last week, I wrote about the concerns one service center executive had with customers asking for more material now (especially at these high numbers) and what that might do to the market later this year. The SMU Service Center Inventories report is something every steel buyer should be watching very carefully over the next couple of months. We could see as significant decline in prices down the road if we begin seeing inventories higher than February’s 2.72 months’ supply. Premium level subscribers to SMU have access to our Service Center Inventories and Shipment data. You can contact Paige@SteelMarketUpdate.com if you would like information about upgrading your account.
The SMU Sentiment Index continues to be optimistic, and our survey respondents are reporting solid demand. Last week 33% of the survey respondents reported improving demand. This is coupled with 61% reporting stable demand, with only 6% reporting declining demand.
The war in Ukraine has shifted service center spot prices. At the beginning of March, 87% of manufacturing companies that reported service centers were lowering spot price offers. Last week, only 20% reported lower spot prices, and 70% reported rising spot prices. This is the first time this year that manufacturing companies were reporting higher spot prices out of their service center suppliers. (Btw, 82% of service centers reported offering higher spot prices. Two weeks ago, 71% of the distributors reported they were lowering prices).
The results from this past week’s survey are available to our Premium members on the SMU website.
There is no doubt that spot steel prices will continue to be volatile for most, if not all, of 2022. We expect this volatility will be running its course when the next SMU Steel Summit Conference is held in Atlanta on Aug. 22-24. I encourage all of you to attend this year to hear industry exports discuss the economy, the outlooks for specific industries, trade issues, as well as other issues impacting your business through the end of 2022 and into 2023. You can learn more about the conference by clicking here.
Volatility is the reason for attending one of our steel hedging workshops. Our next Introduction to Steel Hedging Workshop (previously known as Hedging 101) will be held virtually on April 26-27. There will be a half day of instruction each day. You can learn more about the agenda, our instructors, costs to attend and how to register by clicking here.
For those new to the industry, or if you have been in the industry for a while and would like to learn more about the steel-making process, I encourage you to attend one of our Steel 101: Introduction to Steel Making & Market Fundamentals Workshops. Our next workshop will be in person in Memphis and will include a tour of the Nucor Hickman (Arkansas) steel mill. The dates on this workshop are April 19-20. You can learn more about the agenda, our instructors, costs to attend and how to register by clicking here.
For those who cannot attend our in-person Steel 101 workshop, we will hold a virtual event on July 19-20. More information will be coming on that workshop after we close the April event.
Our next free SMU Community Chat Webinar will be on Wednesday, March 23 (this week), when we host Matt Brace and Brian Desigio of Structural Steel Products, Inc. You can register for this free webinar by clicking here.
As always, your business is truly appreciated by all of us associated with Steel Market Update.
John Packard, Founder, John@SteelMarketUpdate.com
John Packard
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